Banks’ decision to lower interest rates contradicts Banrep?

On March 3, the president Gustavo Petro urged the financial system to make an effort to lower interest rates for its clients. Bancolombia was the first bank to respond and announced a 50% rate reduction on its credit cards.

And, like a domino effect, the decision was replicated in other entities.

(Bancolombia lowers interest to about 50% of credit cards).

To date, in addition to Bancolombia, the other banking entities that lowered rates were Banco de Bogotá, Banco de Occidente, Davivienda, BBVA, Banco Agrario de Colombia, Scotiabank Colpatria, Banco Pichincha and the Territorial Development Bank (Findeter).

On average, the entities lowered their rates to between 20% and 25%, applying, in some cases, to specific credit cards and, in others, to the entire portfolio or certain purchases.

(Banco de Bogotá and Banco de Occidente also lower interest rates).

Despite the call of President Petro and the decision of the banks, it must be remembered that the position of the Bank of the Republic is very different: it has maintained its bullish monetary policy, and with the increase in inflation in February, the Issuer would be under pressure to raise rates again.

So, is the position of the banks contrary to what the Banrep does?

(‘We are approaching the inflation ceiling, whatever it may be.’)

For Jeisson Balaguera, CEO of Values ​​AAAthis decision, beyond contradicting the Banco de la República, responds to a strategy of the banks to avoid customer flight, taking into account that financial institutions have projected the exit of a large customer portfolio.

“There are several financial entities that have already been offering low rates, which is why more banks have recalculated their strategy and have also reduced their rates.Balaguera said.

(High inflation would be affecting the credibility of central banks).

For his part, for Marc Hofstetter, Professor of Economics at the Universidad de los AndesAlthough many experts have pointed out that the position goes against the policies of the Bank of the Republic, what really seems striking to him is that the banks had a credit card rate of 46% effective per year.

“And note that the rate that remained, 20%, 25%, is still very high and does not invite people to spend”, notes Hofstetter.

(The benefits for users of lowering bank rates).

The rise in rates has been slowing credit in Colombia and undermined consumer confidence, situation that is leading to a reconsideration of the strategy in the entities.

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